Why renewables push soybean oil prices to a record high
What Happens to Soybean Oil Prices. The deepening of the Wall Street Journal
Soybean oil prices hit an all-time high last week, driven by growing demand from the biofuel sector.
Soybean oil futures on the Chicago Board of Trade were up nearly 70% this year, closing at nearly 72 cents per pound on Friday. This surpassed the previous high in 2008. The rise makes soybean oil one of the year's best-performing commodities in a basket monitored by the Wall Street Journal , along with other commodities such as lumber, corn and pigs.
Soybean oil is commonly used as an ingredient in foods such as cereals, breads, and other snacks. Demand for vegetable oil is growing, however, from the biofuel industry, a major part of the push towards renewable energy highlighted by President Biden's call for the United States to cut carbon emissions in half by half. 2030.
"Biofuel, especially renewable diesel, is a key driver of the demand picture on the vegetable oil side as we look ahead," said Greg Morris, president of the agricultural and oilseed services division of Archer Daniels Midland Co.
The U.S. Department of Agriculture expects the biofuel sector to consume 12 billion pounds of soybean oil in market year 2021-22, up from an estimated 9.5 billion pounds in 2020-21, according to the its monthly supply and demand report released in May.
Manufacturers are racing to keep up. Soybean production capacity in the United States is expected to grow to 935 million gallons in 2021, nearly double from last year, according to data from StoneX Group. By 2023, that capacity is expected to swell to over two billion gallons per year.
“The enthusiasm for this new generation of renewable fuels mimics what we saw in the early days of the ethanol boom,” said Arlan Suderman, chief commodity economist with StoneX.
ADM said last month it would invest $ 350 million in building a new soybean crushing plant – where raw soybeans are processed into products like oil and flour – in Spiritwood, ND ADM said the plant will be open before the 2023 harvest, processing up to 150,000 bushels of soy per day.
ADM is not the only large farm that is investing. Cargill said in March it would spend $ 475 million to upgrade its soybean crushing plants in seven states, improving their efficiency and increasing production.
Cargill in April announced a joint venture with Love's Family of Companies to build a new renewable diesel plant in Hastings, Neb. Once opened, the plant will supply the market with 80 million gallons of renewable diesel per year, Cargill said.
"Our view is that we have to have some kind of presence in the renewable fuel market to get to know it," said Roger Watchorn, Cargill's head of agricultural procurement operations.
Big energy players outside agriculture are also participating. Phillips 66 Co. in April confirmed it had bought a stake in an Iowa-based soybean processing plant and plans to buy 100 percent of the soybean oil produced there, for an expected total of approximately 4,000 barrels per day.
"With some of the new entrants to the market, they are looking to secure their supply chain," said Alan Weber, a founding partner of Kearney, Mo.-based biofuel consulting firm MARC-IV.
While other raw materials, such as used animal fats, make a better renewable fuel, there simply isn't enough of those waste products available, said Juan Sacoto, director of North American agribusiness consulting with IHS Markit Inc. About 40 percent of all bovine tallow and 80% of all recovered yellow cooking fat are already sold for biofuels, making up about two billion pounds of each.
"There's not enough of these fats, so they're turning to vegetable oil," said Mr. Sacoto, adding that IHS expects the biofuel industry to need 20 billion pounds of raw material this year – one a figure that is expected to double over the next five years.
Global supply problems are also a factor pushing vegetable oil prices higher. In Southeast Asia, the coronavirus-related labor shortage has reduced the production of palm oil, an oil used for similar purposes. Palm oil stocks around the world are at their lowest in the past four years. Few expect a quick turnaround, said Kyle Holland, a price analyst at research firm Mintec Ltd.
“The market sentiment is that it will take a long time, even in 2022, for the market to return to normal,” Holland said at a virtual conference in May.
Rising soybean prices in the US are also driving soybean gains, with the most active futures contract on the Chicago Board of Trade jumping to $ 16.43 per bushel in May, the highest level since September 2012. A major source of demand comes from China, which is rebuilding pig populations after African swine fever caused the nation to cull about a third of its flock.
Some are wondering how long soybean oil prices can go up, with consumers noticing that prices in grocery stores are rising.
"The price response for soybean oil in the United States has led people to wonder how big it can get before it reaches a tipping point," said Mr. Watchorn.
(Extract from the Epr press review)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/olio-di-soia-prezzi-rinnovabili/ on Sat, 12 Jun 2021 06:00:55 +0000.